India's tax landscape has undergone one of its most sweeping overhauls in over six decades. From 1st April 2026, the Income Tax Act, 2025 has replaced the Income Tax Act, 1961, bringing with it a new set of rules, revised compliance requirements, and updated rates. Whether you are a salaried employee, a business owner, or an investor, these changes affect how you report income, file returns, and plan your taxes for Tax Year 2026-27.

The Income Tax Act, 2025, which came into force on 1st April 2026, is a landmark reform in India's direct tax framework. It replaces the 64-year-old Income Tax Act, 1961 — which had grown to 819 sections across 47 chapters — with a leaner, more readable statute of 536 sections. The goal is straightforward: simplify taxation, ease compliance, and reduce legal disputes by removing redundant provisions and rewriting complex language in plain terms.

Alongside the Act, the Income Tax Rules 2026 have also come into effect, replacing the decades-old Income Tax Rules, 1962. Notified by the CBDT on 20th March 2026, these rules align with the new Act and introduce updated deduction limits, revised PAN requirements, and redesigned reporting forms.

One of the most structurally significant changes under the new Act is the abolition of the dual system of Financial Year (FY) and Assessment Year (AY). In their place, the Act introduces a single, unified concept: the "Tax Year". Income earned from 1st April 2026 onwards will now be reported under the Tax Year in which it is earned — no more confusion between FY 2026-27 and AY 2027-28. This change simplifies ITR filing, assessments, and compliance tracking for all categories of taxpayers.

One area where taxpayers — especially salaried employees — will notice immediate relief is in allowance and perquisite limits, which have been revised to reflect today's cost of living. The following table captures the key revisions:

Despite the sweeping structural reforms, the income tax slabs under the new tax regime remain unchanged for Tax Year 2026-27. The applicable slab rates are: cleartax

Taxpayers opting for the new regime continue to benefit from a tax rebate of up to ₹60,000 under Section 156 (equivalent to erstwhile Section 87A), effectively making income up to ₹12 lakh tax-free.

Two important changes affect House Rent Allowance (HRA) claimants under the old tax regime. First, the list of "metro cities" eligible for the 50% HRA exemption has been expanded to include eight cities: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad — with the last four being newly added. This is a long-overdue recognition of rising urban rental costs.

Second, compliance requirements have been tightened. Employees must now provide their landlord's PAN, proof of rent payments, and disclose their relationship with the landlord when claiming HRA exemption. Under Schedule III (11) of the new rules, the residential accommodation must not be owned by the assessee, and actual rent expenses must be incurred. These changes are aimed at eliminating fraudulent HRA claims.

The CBDT has overhauled income tax forms under the Income Tax Rules 2026. Issuing documents under old form numbers for Tax Year 2026-27 will render them technically non- compliant. The key renaming changes are:

• Form 16 → Form 130 (TDS certificate for salary, pension, and senior citizen interest income) 

• Form 16A → Form 131 (TDS certificate for non-salary payments) 

• Form 12BB → Form 124 (Investment declaration by employee) 

• Form 26AS → Form 168 (Annual information statement)

Form 130 is issued under Rule 215(1) of the Income Tax Rules 2026. It contains Part A (basic details — Name, Address, PAN, TAN, contact information), Part B (summary of income paid and TDS deducted), and Part C with two annexures — one for salaried employees under Section 392 and one for specified senior citizens under Section 393(1). All TDS certificates must be generated and downloaded from the web portal specified by the Director General of Income Tax (Systems).

A significant relief for business owners and professionals is the extension of the due date for filing ITR-3 and ITR-4 (non-audit cases) from 31st July to 31st August. Notably, this extended deadline applies even for FY 2025-26 (AY 2026-27) — returns filed under the old Act. However:

• ITR-1 and ITR-2 due date remains 31st July 

• Tax Audit due date remains 31st October 

• Revised Return due date extended to 31st March (12 months from the end of the Tax Year, up from the previous 9 months)

Taxpayers filing revised returns after 31st December will be required to pay a late fee — ₹1,000 if income is up to ₹5 lakh, and ₹5,000 if income exceeds ₹5 lakh. An identical late fee applies to belated filings under Section 428 of the new Act (previously Section 234F).

The Finance Act, 2026 has rationalised Tax Collected at Source (TCS) rates, aiming to reduce compliance burden and refund delays. Effective 1st April 2026:

The overarching theme is a uniform 2% rate across most TCS categories, removing the complexity of differential thresholds.

Under Section 393 of the Income Tax Act, 2025 (equivalent to Section 194-IA of the 1961 Act), buyers purchasing immovable property from a resident or an NRI can now deduct TDS using a PAN-based challan — eliminating the earlier requirement to obtain a separate TAN registration. This significantly reduces the compliance burden on homebuyers.

Two notable changes in capital gains taxation take effect from 1st April 2026: Share Buybacks: Until 31st March 2026, amounts received from a company's share buyback were treated as deemed dividends and taxed at applicable slab rates. From 1st April 2026, such receipts will be taxed as capital gains — at an effective rate of 30% for individual promoters and 22% for promoter companies. Sovereign Gold Bonds (SGBs): The capital gains exemption on maturity redemption of SGBs will now apply only to investors who subscribed during the initial issue. Investors who purchased SGBs from the secondary market will no longer enjoy this exemption and will instead have gains taxed as regular capital gains.

Presumptive taxation was designed to be a gift to small businesses — a simpler way to pay taxes without drowning in paperwork. But the Income-tax Act, 2025 has quietly reshaped the rules. If you run a small business, trade in F&O, or advise clients who do, the changes deserve your full attention.

  This article focuses specifically on presumptive taxation for business assessees covered under Section 58(2) of the Income-tax Act, 2025 — the provision that broadly corresponds to Section 44AD of the earlier 1961 Act

Presumptive taxation was introduced to simplify compliance for small businesses by allowing them to declare income at a minimum prescribed percentage of turnover — without maintaining elaborate books of account. Under the Income-tax Act, 1961, Section 44AD served this purpose for years.

Before the Finance Act, 2016, taxpayers declaring profits below the prescribed rate were required to maintain books of account and undergo audit only if their total income exceeded the basic exemption limit. The Finance Act, 2016 added a five-year lock-in condition — if a taxpayer opted into the scheme but then declared income below the prescribed rate within those five years, audit became mandatory if total income exceeded the exemption threshold.

The Income-tax Act, 2025 goes further, replacing Sections 44AD and 44AB with Sections 58 and 63 respectively, and establishing what is now effectively a binary framework: accept the prescribed presumptive income, or maintain books and face audit.

 Section 58 — The Core Presumptive Provision 

 Under Section 58(2), profits are deemed to be the higher of:

(A) 8% of gross receipts/turnover (reduced to 6% for receipts received through specified banking or online modes, before the due date specified in Section 263(1)); or 

(B) Profit actually earned.

Section 58(2) applies where turnover: 

Does not exceed ₹2 crore; or 

Does not exceed ₹3 crore, provided that aggregate cash receipts do not exceed 5% of total turnover or gross receipts.

Section 58(3) mandates that where an assessee claims actual profits below the prescribed percentage, and total income exceeds the basic exemption threshold (₹4,00,000 under the new tax regime), books of account must be maintained and audited under Section 63.

Section 58(4) bars any loss, allowance, or deduction otherwise allowable under the Act from being set off against income computed under Section 58(2).

 Section 58(8) adds that where the lock-in violation under Section 58(7) applies and total income exceeds the maximum amount not chargeable to tax, the taxpayer is required to maintain books of account and undergo audit under Section 63.